Gold prices dipped on Monday as the dollar firmed against its peers in the wake of indications from the US Federal Reserve last week that it will pursue a tighter monetary policy.
The Fed raised US interest rates last week and said it planned four more increases by the end of 2019 and another in 2020, amid steady economic growth and a strong job market.
Higher US interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
Spot gold was down 0.5 percent at $1,186.29, as of 0748 GMT. In the previous session, gold touched its lowest since August 17 at $1,180.34 an ounce.
“Gold prices remain dependent on the dollar at this juncture. The US economy has been rosy and better than expected. Efforts by the Trump administration to reduce the trade deficit from an economic point of view has been friendly for the greenback as well,” OCBC analyst Barnabas Gan said.
Gold prices are likely to see lower volatility, with the Chinese markets closed for a week, for the Golden Week celebration, Gan said.
The dollar index was up 0.1 per cent versus a basket of major currencies, and hovered close to a near three-week high hit in the previous session.
Gold has fallen about 13 per cent from an April high, largely because of the stronger dollar, which has been boosted by a vibrant US economy and fears of a global trade war. Investors have bought the greenback instead of gold as a safe investment.